2007 Oregon Code - Chapter 733 :: Chapter 733 - Accounting and Investments
Chapter 733 —
Accounting and Investments
2007 EDITION
ACCOUNTING AND INVESTMENTS
INSURANCE
ACCOUNTING
733.010Â Â Â Â Assets
allowed
733.020Â Â Â Â Assets
not allowed
733.030Â Â Â Â Liabilities
in general
733.040Â Â Â Â Reinsurance
credit
733.050Â Â Â Â Increase
of inadequate reserves
733.060Â Â Â Â Unearned
premium reserve
733.070Â Â Â Â Unearned
premium reserve for marine and transportation insurance trip risks
733.080Â Â Â Â Reserves
for health insurance
733.090Â Â Â Â Unearned
premium reserve and fund for title insurance
733.095Â Â Â Â Unearned
premium reserve for home protection insurance
733.100Â Â Â Â Contingency
reserve liability for mortgage insurance
733.115Â Â Â Â Establishing
reserves for variable life insurance and annuity policies
733.140Â Â Â Â Disallowance
of “wash” transactions
733.150Â Â Â Â Alternative
accounting for assets and liabilities
733.160Â Â Â Â Valuation
of assets other than securities
733.165Â Â Â Â Valuation
of securities
733.170Â Â Â Â Accounts
and records
733.210Â Â Â Â DirectorÂ’s
determinations
733.220Â Â Â Â Establishment
and regulation of separate accounts to fund life insurance or annuities
733.230Â Â Â Â Transactions
of separate accounts registered with Securities and Exchange Commission;
application of laws and rules to members of separate account management
committee
STANDARD VALUATION LAW
733.300Â Â Â Â Short
title
733.302Â Â Â Â Reserve
valuation method for life insurance policies and annuity and pure endowment
contracts
733.304Â Â Â Â Opinion
of actuary; rules
733.306Â Â Â Â Computation
of minimum standards for life insurance, industrial insurance, annuities and
pure endowment contracts; rules
733.308Â Â Â Â Computation
of minimum standard for annuities and pure endowment contracts; rules
733.310Â Â Â Â Interest
rates for determining minimum standard for valuation
733.312Â Â Â Â Amount
of required reserves for life insurance policies
733.314Â Â Â Â Amount
of required reserves for certain annuity and pure endowment contracts
733.316Â Â Â Â Aggregate
reserves
733.318Â Â Â Â Alternative
standards of valuation
733.320Â Â Â Â Minimum
required reserve for certain policies
733.322Â Â Â Â Calculation
of reserves for plans for which minimum reserves cannot be determined under ORS
733.312, 733.314 or 733.320; rules
INVESTMENTS
733.510Â Â Â Â Investments
of insurers; rules
733.520Â Â Â Â Current
operating requirements exempted
733.530    “Corporation,”
“sovereign,” “political subdivision” defined
733.540    “Obligation”
defined
733.550    “Amply
secured obligation” defined
733.560    “Unencumbered”
defined
733.570    “Improved
real property” defined
733.575Â Â Â Â Prohibited
use of funds as compensating balances
733.578Â Â Â Â Conditions
necessary for investments used to provide compensating balances
733.580Â Â Â Â Investment
of required capitalization
733.590Â Â Â Â Investment
in obligations of sovereign, political subdivision thereof or corporation
733.600Â Â Â Â Investment
in mortgage loans
733.610Â Â Â Â Investment
in real property
733.620Â Â Â Â Investment
in stocks of corporation
733.630Â Â Â Â Investment
in securities or obligations of certain corporations
Note         Investments
by health care service contractors--2005 c.255 §§2,3
733.635Â Â Â Â Approved
activities of corporations in which investments authorized
733.640Â Â Â Â Lending
funds; limitations on loans
733.650Â Â Â Â Investment
of funds in certain obligations and other specified items
733.652Â Â Â Â Investment
of funds of separate accounts
733.654Â Â Â Â Limitation
on amount of separate account investments; exceptions
733.656Â Â Â Â Limitation
on securities owned or controlled by separate account investments
733.658Â Â Â Â Applicability
of separate account investment limitations
733.670Â Â Â Â Investment
of funds under “prudent investor” standard
733.680Â Â Â Â Acquisition
and retention of personal property generally; purchases or loans for protection
of investment property
733.685Â Â Â Â Investment
of funds by home protection insurer; rules
733.690Â Â Â Â Investment
of funds in title plant
733.695Â Â Â Â Investment
of funds in obligations that are not investment quality; rules
733.700Â Â Â Â Investment
of funds in health care service facilities
733.710Â Â Â Â Investments
authorized by prior law; date of eligibility of investment
733.720Â Â Â Â Investments
subject to additional limitations and requirements
733.730Â Â Â Â Approval
by board of directors of investments and deposits
733.740Â Â Â Â Record
of investments required
733.750Â Â Â Â Disposal
of investments on order of director
733.760Â Â Â Â Insurance
required on buildings on property which is security for loan
733.770Â Â Â Â Limitations
on investments in property of any one person or single parcel of real estate
733.780Â Â Â Â Prohibited
investments
ACCOUNTING
     733.010
Assets allowed. In any
determination of the financial condition of an insurer, there shall be allowed
as assets only such assets as are owned by the insurer and which consist of:
     (1) Cash in the possession or control of
the insurer, including the true balance of any deposit in a solvent bank or
trust company.
     (2) Investments held in accordance with
the Insurance Code, and due or accrued income items in connection therewith to
the extent considered by the Director of the Department of Consumer and
Business Services to be collectible.
     (3) Premium notes, policy loans, liens and
other like policy assets on life insurance policies and accrued interest
thereon, in an amount not exceeding the loan value of the policy.
     (4) Due premiums, deferred premiums,
installment premiums, and written obligations taken for premiums, to the extent
allowed by the director.
     (5) The amount recoverable from a
reinsurer if credit for reinsurance may be allowed to the insurer under ORS
731.509 or 731.510 and amounts receivable on assumed reinsurance representing
funds withheld by a solvent ceding insurer under a reinsurance treaty.
     (6) Deposits or equities recoverable from
underwriting associations, syndicates and reinsurance funds, or from any
suspended banking institution, to the extent deemed by the director to be
available for the payment of losses and claims.
     (7) Other assets considered by the
director to be available for the payment of losses and claims, at values
determined by the director. [1967 c.359 §208; 1971 c.321 §18; 1979 c.818 §1;
1993 c.447 §69; 2001 c.318 §7]
     733.020
Assets not allowed. In
addition to assets impliedly excluded by ORS 733.010, the following expressly
shall not be allowed as assets in any determination of the financial condition
of an insurer:
     (1) Advances to officers, other than
policy loans, whether secured or not, and advances to employees, agents and
other persons on personal security only.
     (2) Stock of such insurer owned by it, or
any material equity therein or loans secured thereby, or any material
proportionate interest in such stock acquired or held through the ownership by
such insurer of an interest in another firm, corporation or business unit.
     (3) Tangible personal property, except
such property as the insurer is otherwise permitted to acquire and retain as an
investment under the Insurance Code and which is deemed by the Director of the
Department of Consumer and Business Services to be available for the payment of
losses and claims or which is otherwise expressly allowable, in whole or in
part, as an asset.
     (4) The amount, if any, by which the book
value of any investment as carried in the ledger assets of the insurer exceeds
the value thereof as determined under the Insurance Code. [1967 c.359 §209;
2001 c.318 §8]
     733.030
Liabilities in general. In
any determination of the financial condition of an insurer, liabilities to be
charged against its assets shall be calculated in accordance with the Insurance
Code and shall include:
     (1) The amount necessary to pay all of its
unpaid losses and claims incurred on or prior to the date of the statement,
whether reported or unreported to the insurer, together with the expenses of
adjustment or settlement thereof.
     (2) For insurance other than specified in
subsections (3) and (4) of this section, the amount of reserves equal to the
unearned portions of the gross premiums charged on policies in force,
calculated in accordance with the Insurance Code.
     (3) For life insurance policies:
     (a) Reserves on life insurance benefits,
valued according to the tables of mortality, rates of interest, and valuation
methods applicable thereto which are adopted pursuant to the Insurance Code.
     (b) Reserves for disability benefits, for
both active and disabled lives.
     (c) Reserves for accidental death
benefits.
     (d) Any additional reserves considered to
be necessary by the Director of the Department of Consumer and Business
Services.
     (4) For health insurance policies, the
amount of reserves required pursuant to ORS 733.080.
     (5) Taxes, expenses and other obligations
due or accrued at the date of the statement.
     (6) Any additional reserves for asset
valuation contingencies or loss contingencies required by the Insurance Code or
considered to be necessary by the director for the protection of policyholders
and stockholders of the insurer. [1967 c.359 §210]
     733.040
Reinsurance credit. The
Director of the Department of Consumer and Business Services shall disallow
reinsurance as credit against the liabilities of a ceding insurer if credit
against the liabilities of the ceding insurer is not allowed as a credit to the
ceding insurer under ORS 731.509 or 731.510. [1967 c.359 §211; 1993 c.447 §70]
     733.050
Increase of inadequate reserves. If the Director of the Department of Consumer and Business Services
determines that an insurerÂ’s reserves, however calculated or estimated, are
inadequate, the director shall require the insurer to maintain reserves in such
additional amount as is needed to make them adequate. [1967 c.359 §212]
     733.060
Unearned premium reserve.
(1) Every insurer shall maintain an unearned premium reserve on all policies in
force.
     (2) The Director of the Department of
Consumer and Business Services may require that such reserves shall be equal to
the unearned portions of the gross premiums in force as calculated pro rata on
each respective risk from the policyÂ’s date of issue. In the absence of such
requirement, the unearned premium reserve shall be equal to the pro rata
unearned portions of the gross premiums in force as calculated by an
approximation method approved by the director. After adopting a method of
computing such reserves, an insurer shall not change methods without approval
of the insurance supervisory official of the insurerÂ’s domicile.
     (3) This section does not apply to:
     (a) Marine and transportation insurance on
trip risks not terminated.
     (b) Health insurance.
     (c) Title insurance.
     (d) Home protection insurance under
policies issued by a home protection insurer.
     (e) Life insurance. [1967 c.359 §213; 1981
c.247 §9]
     733.070
Unearned premium reserve for marine and transportation insurance trip risks. As to marine and transportation insurance,
the entire amount of premiums on trip risks not terminated shall be deemed
unearned. The Director of the Department of Consumer and Business Services may
require the insurer to carry a reserve equal to 100 percent of premiums on trip
risks written during the month ended as of the date of statement. [1967 c.359 §214]
     733.080
Reserves for health insurance.
For all health insurance policies the insurer shall maintain reserves which
place a sound value on its liabilities under such policies and which are not
less than the reserves according to appropriate standards set forth in rules
issued by the Director of the Department of Consumer and Business Services.
Except for policies of credit health insurance, such reserves for nondisabled
lives shall not be less in the aggregate than the pro rata gross unearned
premiums for such policies calculated in accordance with ORS 733.060. [1967
c.359 §215; 1971 c.231 §18]
     733.090
Unearned premium reserve and fund for title insurance. (1) Each title insurer shall maintain a
reserve for unearned premiums on its policies in force, which shall be charged
as a liability in any determination of its financial condition. Such unearned
premium liability shall be separate from and in addition to the insurerÂ’s
liability for incurred but unpaid losses and loss expenses.
     (2) The amount of the unearned premium
reserve shall be determined according to accounting procedures approved or
required by the Director of the Department of Consumer and Business Services.
     (3) A separate and distinct fund, known as
the Title Insurance Unearned Premium Reserve Fund, shall be maintained by each
title insurer in its treasury, as additional security to holders of its title
insurance policies. The amount of the fund shall at least equal the amount of
the unearned premium reserve liability determined in accordance with subsection
(2) of this section. This fund shall be in addition to the insurerÂ’s deposit
with the Department of Consumer and Business Services and deposits required to
be maintained with officials of other jurisdictions. The fund, to the extent of
the unearned premium reserve on business in this state, shall be invested as
provided for funds of a domestic insurer, except that ORS 733.630, 733.670 and
733.690 shall not be applicable to investment of the fund. The remainder of the
fund may be similarly invested, or may be invested as permitted by the laws of
the insurerÂ’s domicile. The insurer shall keep a separate record of the cash
and investments of the fund, giving complete identification of the assets
belonging to the fund and showing full particulars as to withdrawals and
additions. No title insurance policies shall be issued by an insurer during a
period when its unearned premium reserve fund is below the required amount. [1967
c.359 §216; 1999 c.196 §10; 2001 c.318 §9]
     733.095
Unearned premium reserve for home protection insurance. A home protection insurer shall maintain a
reserve for unearned premiums, unpaid losses and claims incurred whether
reported or unreported to the insurer and the expenses of adjustment or
settlement of such losses and claims, in an aggregate amount of not less than
40 percent of the aggregate of premiums charged on the insurerÂ’s policies
currently in force. [1981 c.247 §11]
     733.100
Contingency reserve liability for mortgage insurance. A mortgage insurer shall establish a contingency
reserve liability for the protection of policyholders against the effect of
adverse economic cycles according to accounting procedures approved or required
by the Director of the Department of Consumer and Business Services. [1967
c.359 §217; 1969 c.692 §7; 2001 c.318 §10]
     733.110 [1967 c.359 §218; 1977 c.320 §9; 1981 c.609 §3;
repealed by 1991 c.401 §30]
     733.115
Establishing reserves for variable life insurance and annuity policies. Reserves for variable life insurance and
annuity policies shall be established in accordance with actuarial procedures
that recognize the variable nature of the benefits provided, any mortality
guarantees, and the valuation requirements of the Standard Valuation Law. [1973
c.435 §24; 1981 c.609 §4]
     733.120 [Formerly 739.030; 1977 c.320 §10; 1981
c.609 §5; repealed by 1991 c.401 §30]
     733.123 [Formerly 733.130; repealed by 1991 c.401 §30]
     733.125 [1981 c.609 §2; repealed by 1991 c.401 §30]
     733.127 [1981 c.609 §7; repealed by 1991 c.401 §30]
     733.129 [1981 c.609 §9; repealed by 1991 c.401 §30]
     733.130 [Formerly 739.035; 1969 c.431 §1; 1973 c.636
§1; 1977 c.320 §11; 1981 c.609 §6; renumbered 733.123]
     733.132 [1973 c.636 §3; 1977 c.320 §12; 1981 c.609 §8;
repealed by 1991 c.401 §30]
     733.134 [1973 c.636 §4; 1981 c.609 §10; repealed by
1991 c.401 §30]
     733.136 [1973 c.636 §5; 1981 c.609 §11; repealed by
1991 c.401 §30]
     733.140
Disallowance of “wash” transactions. (1) The Director of the Department of Consumer and Business Services
shall disallow as an asset or as a credit against liabilities any reinsurance
found by the director after a hearing thereon to have been arranged for the
purpose principally of deception as to the ceding insurerÂ’s financial condition
as of the date of any financial statement of the insurer. Without limiting the
general purport of the foregoing provision, reinsurance of any substantial part
of the insurerÂ’s outstanding risks contracted for in fact within four months
prior to the date of any such financial statement and canceled in fact within
four months after the date of such statement, or reinsurance under which the
reinsurer bears no substantial insurance risk or substantial risk of net loss
to itself, shall prima facie be deemed to have been arranged for the purpose
principally of deception.
     (2) The director shall disallow as an
asset any deposit, funds or other assets of the insurer found by the director
after a hearing thereon:
     (a) Not to be in good faith the property
of the insurer;
     (b) Not freely subject to withdrawal or
liquidation by the insurer at any time for the payment or discharge of claims
or other obligations arising under its policies; and
     (c) To be resulting from arrangements made
principally for the purpose of deception as to the insurerÂ’s financial
condition as of the date of any financial statement of the insurer. [1967 c.359
§221; 2005 c.22 §487]
     733.150
Alternative accounting for assets and liabilities. Assets may be allowed as deductions from
corresponding liabilities, liabilities may be charged as deductions from
assets, deductions from assets may be charged as liabilities, and deductions
from liabilities may be allowed as assets, in accordance with the form of
annual statement prescribed by the Director of the Department of Consumer and
Business Services, or otherwise in the discretion of the director. [1967 c.359 §222]
     733.160
Valuation of assets other than securities. (1) Each bond or other evidence of debt having a fixed term and rate
of interest may be valued as follows, if amply secured and not in default as to
principal or interest:
     (a) If purchased at par, at the par value.
     (b) If purchased above or below par,
according to an accepted method of valuation approved by the Director of the
Department of Consumer and Business Services.
     (2) For the purpose of subsection (1) of
this section, the purchase price shall not be a higher amount than the actual
market value at the time of purchase, plus actual brokerage, transfer, postage
or express charges paid in the acquisition of such bond or other evidence of debt.
     (3) For purposes of subsections (1) and
(2) of this section, the director may determine the method of calculating
values. The method or valuation may not be inconsistent with any applicable
method or valuation used by insurers in general or any such method or valuation
then currently formulated or approved by the National Association of Insurance
Commissioners or its successor organization.
     (4) Real property shall be valued as
follows:
     (a) Real property acquired pursuant to a
mortgage loan or contract of sale shall be valued at an amount not greater than
the unpaid principal of the defaulted loan or contract at the date of such
acquisition, together with any taxes and expenses paid or incurred in
connection with such acquisition, and the cost of improvements thereafter made
by the insurer and any amounts thereafter paid by the insurer on assessments
levied for improvements in connection with the property.
     (b) Other real property held by an insurer
shall be valued at an amount not in excess of the cost of the acquired property
and the cost of improvements thereafter made by the insurer, less a reasonable
allowance for depreciation.
     (5) Purchase money mortgages on real
property referred to in subsection (4)(a) of this section shall be valued in an
amount not exceeding the acquisition cost of the real property covered thereby
or 90 percent of the fair value of such real property, whichever is less.
     (6) Other assets, other than securities,
shall be valued at cost of acquisition less any repaid portion thereof, unless
the director determines that another value is proper. [1967 c.359 §223; 1971
c.231 §19; 1993 c.447 §16; 2001 c.318 §11]
     733.165
Valuation of securities. (1)
Securities held by an insurer, other than bonds or other evidences of debt to
which ORS 733.160 applies, must be valued in the discretion of the Director of
the Department of Consumer and Business Services at their market value, at
their appraised value or at prices determined by the director as representing
their fair market value.
     (2) Preferred or guaranteed stocks or
shares while paying full dividends may be carried at a fixed value instead of
market value, at the discretion of the director and in accordance with any
method of valuation approved by the director.
     (3) Stock of a subsidiary corporation of
an insurer must not be valued at an amount in excess of the net value thereof
as based upon the assets only of the subsidiary that would be eligible under
ORS 733.510 to 733.780 for investment of the funds of the insurer directly.
     (4) The director may determine the method
of calculating values as provided in this section, but the method or valuation
may not be inconsistent with any applicable method or valuation used by
insurers in general or any such method of valuation then currently formulated
or approved by the National Association of Insurance Commissioners or its
successor organization. [1993 c.447 §18; 2001 c.318 §17]
     733.170
Accounts and records. An
insurer shall keep its books, records, accounts and transaction source data in such
manner that the Director of the Department of Consumer and Business Services
may readily verify its statements of financial condition and ascertain whether
the insurer is unimpaired, has given proper treatment to policyholders and has
complied with the Insurance Code. [Formerly 738.430]
     733.180 [Formerly 739.075; repealed by 1973 c.435 §27]
     733.190 [Formerly 739.080; repealed by 1973 c.435 §27]
     733.200 [Formerly 739.085; repealed by 1973 c.435 §27]
     733.210
DirectorÂ’s determinations.
(1) In making any determination or prescribing rules relating to items such as
are reported in the form of annual statement and any supplement thereto
required to be filed by an insurer, the Director of the Department of Consumer
and Business Services shall give consideration to recommendations made from
time to time by the National Association of Insurance Commissioners, and to
customary and general practice in insurance accounting.
     (2) The director may apply and may require
insurers to use and comply with standards, practices and procedures established
by the National Association of Insurance Commissioners in its manuals or other
publications, including actuarial, accounting and other opinion and reporting
requirements. [1967 c.359 §228; 1993 c.447 §20]
     733.220
Establishment and regulation of separate accounts to fund life insurance or
annuities. (1) A domestic
insurer authorized to transact life insurance may establish one or more
separate accounts and may allocate thereto amounts, including but not limited
to proceeds applied under optional modes of settlement or under dividend
options, to provide for life insurance or annuities or benefits incidental
thereto, payable in fixed or variable amounts or both.
     (2) The income, gains and losses, realized
or unrealized, from assets allocated to a separate account shall be credited to
or charged against the account without regard to other income, gains and losses
of the insurer.
     (3) Except with the approval of the
Director of the Department of Consumer and Business Services, and under the
conditions the Director may prescribe as to investments and other matters that
shall recognize the guaranteed nature of the benefits, assets representing
reserves for benefits guaranteed as to dollar amount and duration, and for
funds guaranteed as to principal amount or stated rate of interest, shall not
be maintained in a separate account.
     (4) Unless otherwise approved by the
director, and notwithstanding ORS 733.160 or 733.165, assets allocated to a
separate account shall be valued at their market value on the date of
valuation. If there is no readily available market, they shall be valued as
provided under the terms of the policy, the rules or other written agreement
applicable to the separate account. Except as may be otherwise prescribed by
the director under subsection (3) of this section, however, the portion if any
of the assets of a separate account equal to the insurerÂ’s reserves for
guaranteed benefits and funds shall be valued in accordance with the rules
applicable to the insurerÂ’s general assets.
     (5) Amounts allocated to a separate
account in the exercise of the power granted by this section are owned by the
insurer, and the insurer is not, nor shall it hold itself out to be, a trustee
with respect to such amounts. If, and to the extent, it is so provided under
the applicable policies, the portion of the assets of a separate account which
equals the reserves and other policy liabilities for such account shall not be
chargeable with liabilities arising out of any other business the insurer
conducts.
     (6) No sale, exchange or other transfer of
assets may be made by an insurer between any of its separate accounts or
between any other investment account and one or more of its separate accounts
unless:
     (a) In the case of a transfer into a
separate account, the transfer is made solely to establish the account or to
support the operation of the policies applicable to the account;
     (b) In the case of other transfers, the
director has approved the transfer as being equitable; and
     (c) The transfer is made in the form of
cash or, with the approval of the director, securities having a readily
determinable market value.
     (7) The same separate account may not be
used for both variable annuities and variable life insurance.
     (8) The insurer shall maintain in each
separate account assets with a value at least equal to the reserves and other
policy liabilities for such account. [1973 c.435 §6; 1993 c.447 §112]
     733.230
Transactions of separate accounts registered with Securities and Exchange Commission;
application of laws and rules to members of separate account management
committee. (1)
Notwithstanding any other provisions of law a domestic insurer may:
     (a) With respect to a separate account
registered with the federal Securities and Exchange Commission as a unit
investment trust, exercise voting rights, in connection with any securities of
a regulated investment company registered under the federal Investment Company
Act of 1940, as amended, and held in such account, in accordance with instructions
from persons having interests in such account, ratably as determined by the
insurer; and
     (b) With respect to a separate account
registered with the federal Securities and Exchange Commission as a management
investment company, establish for such account a committee, board, or other
body, the members of which need not be otherwise affiliated with the insurer
and may be elected by the vote of persons having interests in such account,
ratably as determined by the insurer. Such committee, board or other body may
have the power, exercisable alone or in conjunction with others, to manage the
separate account and the investment of its assets.
     (2) The insurer or such committee, board
or other body may make such other provisions in respect to the separate account
as may be considered necessary to comply with any applicable federal or state
laws, if the Director of the Department of Consumer and Business Services
approves such provisions as not being hazardous to the insurerÂ’s policyholders
or the public in this state.
     (3) Any provision of the Insurance Code or
rule of the director applicable to the officers or directors of an insurer and
relating to conflicts of interest will also apply to members of a separate
accountÂ’s committee, board or other similar body. No officer or director of an
insurer nor any member of the committee, board or body of a separate account
shall receive directly or indirectly any commission or any other compensation
with respect to the purchase or sale of assets of the separate account. [1973
c.435 §7; 1997 c.249 §218]
STANDARD
VALUATION LAW
     733.300
Short title. ORS 733.300 to
733.322 may be cited as the Standard Valuation Law. [1991 c.401 §17]
     733.302
Reserve valuation method for life insurance policies and annuity and pure
endowment contracts. (1) The
Director of the Department of Consumer and Business Services shall annually
value, or cause to be valued, the reserve liabilities for all outstanding life
insurance policies and annuity and pure endowment contracts of every life insurer
doing business in this state, and may certify the amount of any such reserves,
specifying the mortality table or tables, rate or rates of interest, and
methods, net level premium method or other, used in the calculations of such
reserves. For purposes of ORS 733.300 to 733.322, reserve liabilities shall be
referred to as reserves.
     (2) In calculating reserves, the director
may use group methods and approximate averages for fractions of a year or
otherwise.
     (3) In lieu of the valuation of the
reserves required of any foreign or alien insurer under the Standard Valuation
Law, the director may accept any valuation made, or caused to be made, by the
insurance supervisory official of any state or other jurisdiction when the
valuation complies with the minimum standard provided under the Standard
Valuation Law and if the official of the state or jurisdiction accepts as
sufficient and for all valid legal purposes the certificate of valuation of the
director when the certificate states the valuation to have been made in a
specified manner according to which the aggregate reserves would be at least as
large as if they had been computed in the manner prescribed by the law of that
state or jurisdiction. [1991 c.401 §18]
     733.304
Opinion of actuary; rules.
(1) Each insurer transacting life insurance in this state shall submit annually
to the Director of the Department of Consumer and Business Services the opinion
of a qualified actuary as provided in this section. The following provisions
apply with respect to opinions required under this subsection:
     (a) The opinion must state whether, in the
opinion of the qualified actuary, the reserves and related actuarial items held
in support of the policies and contracts specified by the director by rule are
computed appropriately, are based on assumptions that satisfy contractual
provisions, are consistent with prior reported amounts and comply with
applicable laws of this state. The director by rule shall establish the
specific requirements for the opinion and may require any other items that the
director determines to be necessary to its scope.
     (b) The opinion shall be submitted with
the annual statement reflecting the valuation of the reserve liabilities for
each year.
     (c) The opinion shall apply to all
business in force, including individual and group health insurance plans, in
form and substance acceptable to the director as specified by rule.
     (d) The director by rule:
     (A) Shall adopt standards on which
actuarial opinions under this subsection must be based. In adopting the
standards, the director shall consider standards established from time to time
by the Actuarial Standards Board of the
     (B) Shall define “qualified actuary” for
purposes of this subsection, by establishing qualifications required of an
actuary for the purpose of giving the opinions. In establishing the definition,
the director shall consider standards established from time to time by the
     (C) May also adopt any other rules needed
for carrying out this subsection.
     (e) In the case of an opinion required to
be submitted by a foreign or alien insurer, the director may accept the opinion
filed by the insurer with the insurance supervisory official of another state
if the director determines that the opinion reasonably meets the requirements
applicable to a domestic insurer.
     (f) Except in cases of fraud or willful
misconduct, a qualified actuary shall not be liable for damages to any person
other than the insurer or the director for any act, error, omission, decision
or conduct with respect to the actuaryÂ’s opinion.
     (g) For each opinion submitted under this
subsection, a memorandum shall be prepared supporting the opinion. The
memorandum must conform in form and substance to requirements established by
the director by rule.
     (h) If an insurer fails to provide a
supporting memorandum within the period specified by rule or if the director
determines that the supporting memorandum provided by the insurer fails to meet
the standards prescribed by rule or is otherwise unacceptable to the director,
the director may engage a qualified actuary at the expense of the insurer to
review the opinion and the basis for the opinion and prepare any supporting
memorandum that is required by the director.
     (i) Except as provided in this paragraph,
a memorandum in the possession or control of the director that is in support of
an actuarial opinion, and any other material provided by the insurer to the
director in connection with the memorandum, is confidential as provided in ORS
705.137. Notwithstanding ORS 705.137, such a memorandum and other materials are
subject to subpoena only for the purpose of defending an action seeking damages
from the actuary submitting the memorandum by reason of any action required by
this section or by rules adopted under this section. Once any portion of the
confidential memorandum is cited by the insurer in its marketing or is cited
before any governmental agency other than a state insurance department or is
released by the insurer to the news media, all portions of the confidential
memorandum shall be no longer confidential. In addition to the uses and
disclosures allowed under ORS 705.137, a memorandum or other material may
otherwise be released by the director:
     (A) With the written consent of the
insurer; or
     (B) To the
     (j) Grounds for disciplinary action by the
director against the insurer or the qualified actuary shall be defined by rule.
     (2) Unless exempted by the director by
rule, each insurer transacting life insurance in this state shall include in
each opinion required by subsection (1) of this section an opinion by the same
actuary who prepared the opinion required by subsection (1) of this section.
The following provisions apply with respect to the opinion:
     (a) The actuary shall state the actuary’s
opinion as to whether the reserves and related actuarial items held in support
of the policies and contracts specified by the director by rule, when
considered in light of the assets held by the insurer with respect to the
reserves and related actuarial items, including but not limited to the
investment earnings on the assets and the considerations anticipated to be
received and retained under the policies and contracts, make adequate provision
for the insurerÂ’s obligations under the policies and contracts, including but
not limited to the benefits under and expenses associated with the policies and
contracts.
     (b) The director may provide by rule for a
transition period for establishing any higher reserves that the actuary may
deem necessary in order to render the opinion required under this subsection. [1991
c.401 §19; 2001 c.377 §12]
     733.306
Computation of minimum standards for life insurance, industrial insurance,
annuities and pure endowment contracts; rules. Except as otherwise provided in ORS 733.308
and 733.310, the minimum standard for the valuation of all outstanding life
insurance policies and annuity and pure endowment contracts issued prior to the
operative date stated in ORS 743.204 for the Standard Nonforfeiture Law for
Life Insurance shall be that provided by the laws of this state in effect
immediately prior to that operative date. Except as otherwise provided in ORS
733.308 and 733.310, the minimum standard for the valuation of all such
policies and contracts issued on or after the operative date stated in ORS
743.204 for the Standard Nonforfeiture Law for Life Insurance shall be the
commissioners reserve valuation methods defined in ORS 733.312, 733.314 and
733.320, three and one-half percent interest, or in the case of life insurance
policies and contracts, other than annuity and pure endowment contracts, issued
on or after January 1, 1974, four percent interest for such policies issued
prior to January 1, 1978, five and one-half percent interest for single premium
life insurance policies and four and one-half percent interest for all other
such policies issued on and after January 1, 1978, and the following tables:
     (1) For all ordinary policies of life
insurance issued on the standard basis, excluding any disability and accidental
death benefits in such policies:
     (a) The Commissioners 1941 Standard
Ordinary Mortality Table for such policies issued prior to the operative date
stated in ORS 743.216 (5) for the Standard Nonforfeiture Law for Life
Insurance;
     (b) The Commissioners 1958 Standard
Ordinary Mortality Table for such policies issued on or after the operative
date stated in ORS 743.216 (5) for the Standard Nonforfeiture Law for Life
Insurance and prior to the operative date stated in ORS 743.215 for the
Standard Nonforfeiture Law for Life Insurance, except that for any category of
such policies issued on female risks, all modified net premiums and present
values referred to in ORS 733.300 to 733.322 may be calculated according to an
age not more than six years younger than the actual age of the insured; and
     (c) For such policies issued on or after
the operative date stated in ORS 743.215 for the Standard Nonforfeiture
Law for Life Insurance:
     (A) The Commissioners 1980 Standard
Ordinary Mortality Table;
     (B) At the election of the insurer for any
one or more specified plans of life insurance, the Commissioners 1980 Standard
Ordinary Mortality Table with Ten-Year Select Mortality Factors; or
     (C) Any ordinary mortality table, adopted
after 1980 by the National Association of Insurance Commissioners, that is
approved by rule adopted by the Director of the Department of Consumer and
Business Services for use in determining the minimum standard of valuation for
such policies.
     (2) For all industrial life insurance
policies issued on the standard basis, excluding any disability and accidental
death benefits in such policies:
     (a) The 1941 Standard Industrial Mortality
Table for such policies issued prior to the operative date defined in ORS
743.216 (7) of the Standard Nonforfeiture Law for Life Insurance; and
     (b) For such policies issued on or after
such operative date, the Commissioners 1961 Standard Industrial Mortality Table
or any industrial mortality table, adopted after 1980 by the National
Association of Insurance Commissioners, that is approved by rule adopted by the
director for use in determining the minimum standard of valuation for such
policies.
     (3) For individual annuity and pure
endowment contracts, excluding any disability and accidental death benefits in
such policies:
     (a) The 1937 Standard Annuity Mortality
Table;
     (b) At the option of the insurer, the
Annuity Mortality Table for 1949, Ultimate; or
     (c) Any modification of either table
referred to in paragraph (a) or (b) of this subsection that is approved by the
director.
     (4) For group annuity and pure endowment
contracts, excluding any disability and accidental death benefits in such
policies:
     (a) The Group Annuity Mortality Table for
1951;
     (b) Any modification of the table referred
to in paragraph (a) of this subsection that is approved by the director; or
     (c) At the option of the insurer, any of
the tables or modifications of tables specified for individual annuity and pure
endowment contracts.
     (5)(a) For total and permanent disability
benefits in or supplementary to ordinary policies or contracts:
     (A) For policies or contracts issued on or
after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to
1950 termination rates of the 1952 Disability Study of the Society of
Actuaries, with due regard to the type of benefit or any tables of disablement
rates and termination rates adopted after 1980 by the National Association of
Insurance Commissioners, that are approved by rule adopted by the director for
use in determining the minimum standard of valuation for such policies;
     (B) For policies or contracts issued on or
after January 1, 1961 and prior to January 1, 1966, either the tables
referred to in subparagraph (A) of this paragraph or, at the option of the
insurer, the Class (3) Disability Table (1926); and
     (C) For policies issued prior to January
1, 1961 the Class (3) Disability Table (1926).
     (b) Any table referred to in paragraph (a)
of this subsection shall, for active lives, be combined with a mortality table
permitted for calculating the reserves for life insurance policies.
     (6) For accidental death benefits in or
supplementary to policies:
     (a) For policies issued on or after
January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental
death benefits table adopted after 1980 by the National Association of
Insurance Commissioners, that is approved by rule adopted by the director for
use in determining the minimum standard of valuation for such policies.
     (b) For policies issued on or after
January 1, 1961, and prior to January 1, 1966, either the table referred to in
paragraph (a) of this subsection or, at the option of the insurer, the
Inter-Company Double Indemnity Mortality Table.
     (c) For policies issued prior to
January 1, 1961, the Inter-Company Double Indemnity Mortality Table.
     (7) The table used under subsection
(6)(a), (b) or (c) of this section shall be combined with a mortality table for
calculating the reserves for life insurance policies.
     (8) For group life insurance, life
insurance issued on the substandard basis and other special benefits, an
insurer may use tables therefor that are approved by the director. [1991 c.401 §20]
     733.308
Computation of minimum standard for annuities and pure endowment contracts;
rules. Except as provided in
ORS 733.310, the minimum standard for the valuation of all individual annuity
and pure endowment contracts issued on or after January 1, 1979, and for all
annuities and pure endowments purchased on or after January 1, 1979, under
group annuity and pure endowment contracts, shall be the commissionerÂ’s reserve
valuation methods defined in ORS 733.312 and 733.314 and the following tables
and interest rates:
     (1) For individual annuity and pure
endowment contracts issued prior to January 1, 1979, excluding any disability
and accidental death benefit in such contracts, the 1971 Individual Annuity
Mortality Table, or any modification of that table approved by the Director of
the Department of Consumer and Business Services, and six percent interest for
single premium immediate annuity contracts, and four percent interest for all
other individual annuity and pure endowment contracts.
     (2) For individual single premium
immediate annuity contracts issued on or after January 1, 1979, excluding any
disability and accidental death benefits in such contracts, the 1971 Individual
Annuity Mortality Table or any individual annuity mortality table, adopted
after 1980 by the National Association of Insurance Commissioners that is approved
by rule adopted by the director for use in determining the minimum standard of
valuation for such contracts, or any modification of these tables approved by
the director, and seven and one-half percent interest.
     (3) For individual annuity and pure endowment
contracts issued on or after January 1, 1979, other than single premium
immediate annuity contracts, excluding any disability and accidental death
benefits in such contracts, the 1971 Individual Annuity Mortality Table or any
individual annuity mortality table adopted after 1980 by the National
Association of Insurance Commissioners that is approved by rule adopted by the
director for use in determining the minimum standard of valuation for such
contracts, or any modification of these tables approved by the director, and
five and one-half percent interest for single premium deferred annuity and pure
endowment contracts and four and one-half percent interest for all other such
individual annuity and pure endowment contracts.
     (4) For all annuities and pure endowments
purchased prior to January 1, 1979, under group annuity and pure endowment
contracts, excluding any disability and accidental death benefits purchased
under such contracts, the 1971 Group Annuity Mortality Table or any
modification of this table approved by the director, and six percent interest.
     (5) For all annuities and pure endowments
purchased on or after January 1, 1979, under group annuity and pure endowment
contracts, excluding any disability and accidental death benefits purchased under
such contracts, the 1971 Group Annuity Mortality Table, or any group annuity
mortality table adopted after 1980 by the National Association of Insurance
Commissioners, that is approved by the director by rule for use in determining
the minimum standard of valuation for such annuities and pure endowments, or
any modification of these tables approved by the director, and seven and
one-half percent interest. [1991 c.401 §21]
     733.310
Interest rates for determining minimum standard for valuation. (1) The interest rates used in determining
the minimum standard for the valuation of the following shall be the calendar
year statutory valuation interest rates as defined in this section:
     (a) All life insurance policies issued in
a particular calendar year, on or after the operative date stated in ORS
743.215 for the Standard Nonforfeiture Law for Life Insurance;
     (b) All individual annuity and pure
endowment contracts issued in a particular calendar year on or after
January 1, 1982;
     (c) All annuities and pure endowments
purchased in a particular calendar year on or after January 1, 1982, under
group annuity and pure endowment contracts; and
     (d) The net increase, if any, in a
particular calendar year after January 1, 1982, in amounts held under
guaranteed interest contracts.
     (2) Calendar year statutory valuation
interest rates shall be established as follows:
     (a) Except as provided in paragraph (b) of
this subsection, the calendar year statutory valuation interest rates, “I”,
shall be determined as follows and the results rounded to the nearer
one-quarter of one percent:
     (A) For life insurance:
     I=0.03+W(R1−0.03)+W/2(R2−0.09)
     (B) For single premium immediate annuities
and for annuity benefits involving life contingencies arising from other
annuities with cash settlement options and from guaranteed interest contracts
with cash settlement options,
     I=0.03+W(R−0.03)
where R1 is the lesser of R and 0.09, R2 is the greater of R and 0.09,
R is the reference interest rate defined in this section and W is the weighting
factor defined in this section.
     (C) For other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on an issue year basis, except as stated in subparagraph (B) of
this paragraph, the formula for life insurance stated in subparagraph (A) of
this paragraph shall apply to annuities and guaranteed interest contracts with
guarantee durations in excess of 10 years and the formula for single premium
immediate annuities stated in subparagraph (B) of this paragraph shall apply to
annuities and guaranteed interest contracts with guarantee duration of 10 years
or less.
     (D) For other annuities with no cash
settlement options and for guaranteed interest contracts with no cash
settlement options, the formula for single premium immediate annuities stated
in subparagraph (B) of this paragraph shall apply.
     (E) For other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a change in fund basis, the formula for single premium
immediate annuities stated in subparagraph (B) of this paragraph shall apply.
     (b) If the calendar year statutory
valuation interest rate for any life insurance policies issued in any calendar
year determined without reference to this paragraph differs from the
corresponding actual rate for similar policies issued in the immediately
preceding calendar year by less than one-half of one percent, the calendar year
statutory valuation interest rate for such life insurance policies shall be equal
to the corresponding actual rate for the immediately preceding calendar year.
For purposes of applying this paragraph, the calendar year statutory valuation
interest rate for life insurance policies issued in a calendar year shall be
determined for 1980, using the reference interest rate defined in 1979, and
shall be determined for each subsequent calendar year regardless of the
operative date of ORS 743.215 as part of the Standard Nonforfeiture Law
for Life Insurance.
     (3) Weighting factors shall be as follows:
     (a) The weighting factors referred to in
the formulas stated in subsection (2) of this section are given in the
following tables:
     (A) Weighting Factors for Life Insurance:
     Guarantee
     Duration                                       Weighting
     (Years)                                         Factors
     10 or less                                      0.50
     More than 10, but less than
20Â Â Â Â Â 0.45
     More than 20                                0.35
For life
insurance, the guarantee duration is the maximum number of years the life
insurance can remain in force on a basis guaranteed in the policy or under
options to convert to plans of life insurance with premium rates or
nonforfeiture values or both that are guaranteed in the original policy.
     (B) Weighting factor for single premium
immediate annuities and for annuity benefits involving life contingencies
arising from other annuities with cash settlement options and guaranteed
interest contracts with cash settlement options is 0.80.
     (C) Weighting factors for other annuities
and for guaranteed interest contracts, except as stated in subparagraph (B) of
this paragraph, shall be as specified in the following tables (i), (ii) and
(iii), according to the rules and definitions in the following tables (iv), (v)
and (vi):
     (i) For annuities and guaranteed interest
contracts valued on an issue year basis:
     Guarantee                                     Weighting
Factor
     Duration                                       for Plan
Type
     (Years)                                         A           B          C
     5 or less:                                       0.80     0.60      0.50
     More than 5, but not more
     than 10:                                        0.75     0.60      0.50
     More than 10, but not more
     than 20:                                        0.65     0.50      0.45
     More than 20:                               0.45     0.35      0.35
     (ii) For annuities and guaranteed interest
contracts valued on a change in fund basis, the factors shown in table (i)
above increased by:
                     Plan Type
                A        B        C
              0.15    0.25    0.05
     (iii) For annuities and guaranteed
interest contracts valued on an issue year basis, other than those with no cash
settlement options, that do not guarantee interest on considerations received
more than one year after issue or purchase and for annuities and guaranteed
interest contracts valued on a change in fund basis that do not guarantee
interest rates on considerations received more than 12 months beyond the valuation
date, the factors shown in (i) or derived in (ii) increased by:
                     Plan Type
                A        B        C
              0.05    0.05    0.05
     (iv) For other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, the guaranteed duration is the number of years for which the contract
guarantees interest rates in excess of the calendar year statutory valuation
interest rate for life insurance policies with guarantee duration in excess of
20 years. For other annuities with no cash settlement options and for
guaranteed interest contracts with no cash settlement options, the guaranteed
duration is the number of years from the date of issue or date of purchase to
the date annuity benefits are scheduled to commence.
     (v) Plan type as used in the tables in this
subsection is defined as follows:
     Plan Type A: At any time the
policyholder: (1) may withdraw funds only with an adjustment to reflect changes
in interest rates or asset values since receipt of the funds by the insurer; or
(2) may withdraw funds without such adjustment but only in installments over
five years or more; or (3) may withdraw funds only as an immediate life
annuity; or (4) is not permitted to make a withdrawal.
     Plan Type B: Before
expiration of the interest rate guarantee, the policyholder: (1) may withdraw
funds only with adjustment to reflect changes in interest rates or asset values
since receipt of the funds by the insurer; or (2) may withdraw funds without
such adjustment but only in installments over five years or more; or (3) is not
permitted to make a withdrawal. At the end of interest rate guarantee, funds
may be withdrawn without such adjustment in a single sum or installments over a
period of less than five years.
     Plan Type C: Policyholder
may withdraw funds before expiration of interest rate guarantee in a single sum
or installments over less than five years either: (1) without adjustment to
reflect changes in interest rates or asset values since receipt of the funds by
the insurer; or (2) subject only to a fixed surrender charge stipulated in the
contract as a percentage of the fund.
     (b) An insurer may elect to value
guaranteed interest contracts with cash settlement options and annuities with
cash settlement options on either an issue year basis or on a change in fund
basis. Guaranteed interest contracts with no cash settlement options and other
annuities with no cash settlement options must be valued on an issue year
basis. As used in this paragraph, an issue year basis of valuation refers to a
valuation basis under which the interest rate used to determine the minimum
valuation standard for the entire duration of the annuity or guaranteed
interest contract is the calendar year valuation interest rate for the year of
issue or year of purchase of the annuity or guaranteed interest contract, and
the change in fund basis of valuation refers to a valuation basis under which
the interest rate used to determine the minimum valuation standard applicable
to each change in the fund held under the annuity or guaranteed interest
contract is the calendar year valuation interest rate for the year of the
change in the fund.
     (4) The reference interest rate referred
to in subsection (2) of this section is defined as follows:
     (a) For all life insurance, the lesser of
the average over a period of 36 months and the average over a period of 12
months, ending on June 30 of the calendar year next preceding the year of
issue, of the Monthly Average of the Composite Yield on Seasoned Corporate
Bonds, as published by MoodyÂ’s Investors Service, Inc.
     (b) For single premium immediate annuities
and for annuity benefits involving life contingencies arising from other
annuities with cash settlement options and guaranteed interest contracts with
cash settlement options, the average over a period of 12 months, ending on
June 30 of the calendar year of issue or year of purchase of the Monthly
Average of the Composite Yield on Seasoned Corporate Bonds, as published by
MoodyÂ’s Investors Service, Inc.
     (c) For other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a year of issue basis, except as stated in paragraph (b) of
this subsection, with guarantee duration in excess of 10 years, the lesser of
the average over a period of 36 months and the average over a period of 12
months, ending on June 30 of the calendar year of issue or purchase, of
the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as
published by MoodyÂ’s Investors Service, Inc.
     (d) For other annuities with cash settlement
options and guaranteed interest contracts with cash settlement options, valued
on a year of issue basis, except as stated in paragraph (b) of this subsection,
with guarantee duration of 10 years or less, the average over a period of 12
months, ending on June 30 of the calendar year of issue or purchase, of
the Monthly Average of the Composite Yield on Seasoned Corporate Bonds, as
published by MoodyÂ’s Investors Service, Inc.
     (e) For other annuities with no cash
settlement options and for guaranteed interest contracts with no cash
settlement options, the average over a period of 12 months, ending on
June 30 of the calendar year of issue or purchase, of the Monthly Average
of the Composite Yield on Seasoned Corporate Bonds, as published by MoodyÂ’s
Investors Service, Inc.
     (f) For other annuities with cash
settlement options and guaranteed interest contracts with cash settlement
options, valued on a change in fund basis, except as stated in paragraph (b) of
this subsection, the average over a period of 12 months, ending on June 30 of
the calendar year of the change in the fund, of the Monthly Average of the
Composite Yield on Seasoned Corporate Bonds, as published by MoodyÂ’s Investors
Service, Inc.
     (5) In the event that the Monthly Average
of the Composite Yield on Seasoned Corporate Bonds is no longer published by
MoodyÂ’s Investors Service, Inc. or in the event that the National Association
of Insurance Commissioners determines that the Monthly Average of the Composite
Yield on Seasoned Corporate Bonds as published by MoodyÂ’s Investors Service,
Inc. is no longer appropriate for the determination of the reference interest
rate, the Director of the Department of Consumer and Business Services by rule
may adopt an alternative method for determination of the reference interest
rate. The director shall consider the alternative method adopted by the
National Association of Insurance Commissioners. An insurer may substitute the
alternative method adopted by rule. [1991 c.401 §22]
     733.312
Amount of required reserves for life insurance policies. (1) Except as otherwise provided in ORS
733.314 and 733.320, reserves according to the commissioners reserve valuation
method for the life insurance and endowment benefits of policies providing for
a uniform amount of insurance and requiring the payment of uniform premiums
shall be the excess, if any, of the present value, at the date of valuation, of
the future guaranteed benefits provided for by the policies, over the then
present value of any future modified net premiums therefor. The modified net
premiums for any such policy shall be the uniform percentage of the respective
contract premiums for such benefits that the present value, at the date of
issue of the policy, of all such modified net premiums shall be equal to the sum
of the then present value of such benefits provided for by the policy and the
excess of A over B, as follows:
     (a) A net level annual premium equal to
the present value, at the date of issue, of such benefits provided for after
the first policy year, divided by the present value, at the date of issue, of
an annuity of one per annum payable on the first and each subsequent
anniversary of such policy on which a premium falls due, except that the net
level annual premium shall not exceed the net level annual premium on the 19
year premium whole life plan for insurance of the same amount at an age one
year higher than the age at issue of such policy.
     (b) A net one year term premium for such
benefits provided for in the first policy year.
     (2) For any life insurance policy issued
on or after January 1, 1986, for which the contract premium in the first
policy year exceeds that of the second year and for which no comparable
additional benefit is provided in the first year for the excess and which
provides an endowment benefit or a cash surrender value or a combination
thereof in an amount greater than the excess premium, the reserve according to
the commissioners reserve valuation method as of any policy anniversary
occurring on or before the assumed ending date, which is defined as the first
policy anniversary on which the sum of any endowment benefit and any cash
surrender value then available is greater than such excess premium, shall,
except as otherwise provided in ORS 733.320, be the greater of the reserve as
of the policy anniversary calculated as described in subsection (1) of this
section and the reserve as of the policy anniversary calculated as described in
subsection (1) of this section, but with (i) the value defined in subsection
(1)(a) of this section being reduced by 15 percent of the amount of the excess
first year premium, (ii) all present values of benefits and premiums being
determined without reference to premiums or benefits provided for by the policy
after the assumed ending date, (iii) the policy being assumed to mature on such
date as an endowment, and (iv) the cash surrender value provided on such date
being considered as an endowment benefit. The mortality and interest bases
stated in ORS 733.306 and 733.310 shall be used for the purpose of making the
comparison.
     (3) Reserves according to the
commissioners reserve valuation method shall be calculated by a method
consistent with subsections (1) and (2) of this section for:
     (a) Life insurance policies providing for
a varying amount of insurance or requiring the payment of varying premiums;
     (b) Group annuity and pure endowment
contracts purchased under a retirement plan or plan of deferred compensation,
established or maintained by an employer, including a partnership or sole
proprietorship, or by an employee organization, or by both, other than a plan
providing individual retirement accounts or individual retirement annuities
under Section 408 of the Internal Revenue Code, as now or hereafter amended;
     (c) Disability and accidental death benefits
in all policies and contracts; and
     (d) All other benefits, except life
insurance and endowment benefits in life insurance policies and benefits
provided by all other annuity and pure endowment contracts. [1991 c.401 §23]
     733.314
Amount of required reserves for certain annuity and pure endowment contracts. (1) This section applies to all annuity and
pure endowment contracts other than group annuity and pure endowment contracts
purchased under a retirement plan or plan of deferred compensation, established
or maintained by an employer, including a partnership or sole proprietorship,
or by an employee organization, or by both, other than a plan providing
individual retirement accounts or individual retirement annuities under Section
408 of the Internal Revenue Code, as now or hereafter amended.
     (2) Reserves according to the
commissioners annuity reserve method for benefits under annuity or pure
endowment contracts, excluding any disability and accidental death benefits in
such contracts, shall be the greatest of the respective excesses of the present
values, at the date of valuation, of the future guaranteed benefits, including
guaranteed nonforfeiture benefits, provided for by such contracts at the end of
each respective contract year, over the present value, at the date of
valuation, of any future valuation considerations derived from future gross
considerations, required by the terms of such contract, that become payable
prior to the end of such respective contract year. The future guaranteed
benefits shall be determined by using the mortality table, if any, and the
interest rate, or rates, specified in such contracts for determining guaranteed
benefits. The valuation considerations are the portions of the respective gross
considerations applied under the terms of such contracts to determine
nonforfeiture values. [1991 c.401 §24]
     733.316
Aggregate reserves. (1) The
aggregate reserves of an insurer for all life insurance policies, excluding
disability and accidental death benefits, issued on or after the operative date
stated in ORS 743.204 for the Standard Nonforfeiture Law for Life Insurance,
shall not be less than the aggregate reserves calculated in accordance with the
methods set forth in ORS 733.312, 733.314, 733.320 and 733.322 and the
mortality table or tables and rate or rates of interest used in calculating
nonforfeiture benefits for such policies.
     (2) The aggregate reserves of an insurer
for all policies, contracts and benefits shall not be less than the aggregate
reserves determined by the qualified actuary to be necessary to render the
opinion required by ORS 733.304. [1991 c.401 §25]
     733.318
Alternative standards of valuation. (1) Reserves for all policies and contracts issued prior to the
operative date stated in ORS 743.204 for the Standard Nonforfeiture Law for
Life Insurance may be calculated, at the option of the insurer, according to
any standards that produce greater aggregate reserves for all such policies and
contracts than the minimum reserves required by the laws in effect immediately
prior to the operative date.
     (2) Reserves for any category of policies,
contracts or benefits as established by the Director of the Department of
Consumer and Business Services, issued on or after the operative date stated in
ORS 743.204 for the Standard Nonforfeiture Law for Life Insurance, may be
calculated, at the option of the insurer, according to any standards that
produce greater aggregate reserves for the category than those calculated
according to the minimum standard provided in ORS 733.300 to 733.322, but the
rate or rates of interest used for policies and contracts, other than annuity
and pure endowment contracts, shall not be higher than the corresponding rate
or rates of interest used in calculating any nonforfeiture benefits provided in
the policies or contracts.
     (3) An insurer that at any time has
adopted any standard of valuation producing greater aggregate reserves than
those calculated according to the minimum standard provided in ORS 733.300 to
733.322 may, with the approval of the director, adopt any lower standard of
valuation. The standard shall not be lower than the minimum provided in ORS
733.300 to 733.322, except that for the purposes of this subsection, the
holding of additional reserves previously determined by a qualified actuary to
be necessary to render the opinion required by ORS 733.304 shall not be deemed
to be the adoption of such a higher standard of valuation. [1991 c.401 §26]
     733.320
Minimum required reserve for certain policies. (1) Except as provided in subsection (2) of
this section, if in any contract year the gross premium charged by an insurer
on any life insurance policy or contract is less than the valuation net premium
for the policy or contract calculated by the method used in calculating the
reserve thereon but using the minimum valuation standards of mortality and rate
of interest, the minimum reserve required for the policy or contract shall be
the greater of either the reserve calculated according to the mortality table,
rate of interest, and method actually used for the policy or contract, or the
reserve calculated by the method actually used for the policy or contract but
using the minimum valuation standards of mortality and rate of interest and
replacing the valuation net premium by the actual gross premium in each
contract year for which the valuation net premium exceeds the actual gross
premium. The minimum valuation standards of mortality and rate of interest
referred to in this subsection are the standards stated in ORS 733.306 and
733.310.
     (2) For any life insurance policy issued
on or after January 1, 1986, for which the gross premium in the first
policy year exceeds that of the second year and for which no comparable
additional benefit is provided in the first year for the excess and which provides
an endowment benefit or a cash surrender value or a combination thereof in an
amount greater than the excess premium, subsection (1) of this section shall
apply as if the method actually used in calculating the reserve for the policy
were the method described in ORS 733.312 (1). The minimum reserve at each
policy anniversary of such a policy shall be the greater of the minimum reserve
calculated in accordance with ORS 733.312, and the minimum reserve calculated
in accordance with this section. [1991 c.401 §27]
     733.322
Calculation of reserves for plans for which minimum reserves cannot be
determined under ORS 733.312, 733.314 or 733.320; rules. (1) For any plan of life insurance that
provides for future premium determination, the amounts of which are to be
determined by the insurer based on then estimates of future experience, or in
the case of any plan of life insurance or annuity that is of such a nature that
the minimum reserves cannot be determined by the methods described in ORS
733.312, 733.314 and 733.320, the reserves held under any such plan must:
     (a) Be appropriate in relation to the
benefits and the pattern of premiums for that plan; and
     (b) Be computed by a method that is
consistent with the principles of ORS 733.300 to 733.322, as determined by
rules adopted by the Director of the Department of Consumer and Business
Services.
     (2) Any policy, contract or certificate
providing life insurance under a plan referred to in subsection (1) of this
section must be reviewed and specifically approved by the director before it
can be marketed, issued, delivered or used in this state. [1991 c.401 §28]
INVESTMENTS
     733.510
Investments of insurers; rules.
(1) Funds of a domestic insurer shall be invested, reinvested and used in the
manner and subject to the conditions, restrictions and limitations set forth in
ORS 733.510 to 733.780.
     (2) Investments of a foreign or alien
insurer which would be authorized for a like domestic insurer shall be allowed
as assets in any determination of its financial condition. Other investments of
a foreign or alien insurer which are authorized by the laws of its domicile may
be so allowed at the discretion of the Director of the Department of Consumer
and Business Services.
     (3) The director may adopt rules
establishing standards and limitations for investments by insurers that are not
otherwise specifically permitted or prohibited by ORS 733.510 to 733.780.
     (4) The investment program of an insurer
must take into account the safety of the principal of the insurer, investment
yield and return, stability in the value of the investment, liquidity necessary
for expected business needs of the insurer and investment diversification
according to standards established by rule. The director may direct an insurer
to take action to conform to the requirements of this subsection. [Formerly
738.235; 1989 c.425 §2; 1993 c.447 §21]
     733.520
Current operating requirements exempted. Funds of an insurer necessary to satisfy normal current operating
requirements are not subject to ORS 733.510 to 733.780. Normal current
operating requirements include, but are not limited to, the acquisition of
personal property necessary or convenient in the operation of the insurerÂ’s
business. [1967 c.359 §230]
     733.530
“Corporation,” “sovereign,” “political subdivision” defined. As used in ORS 733.510 to 733.780:
     (1) “Corporation” means a corporation,
joint stock association or business trust organized and existing under the laws
of a sovereign.
     (2) “Sovereign” means the
     (3) “Political subdivision” means an
incorporated county, city, town, village, municipality, or subdivision thereof,
or a public corporation, district, agency, commission, authority or
instrumentality, or subdivision thereof. [1967 c.359 §231]
     733.540
“Obligation” defined. As
used in ORS 733.510 to 733.780, “obligation” means a bond, debenture, note,
warrant, certificate or other evidence of indebtedness. [1967 c.359 §232]
     733.550
“Amply secured obligation” defined. As used in ORS 733.510 to 733.780, “amply secured obligation” means an
obligation which is not in default and as to which no default is imminent, and
which satisfies the requirements of one or more of the following subsections:
     (1) An obligation of a sovereign or political
subdivision thereof, if it is issued, assumed or guaranteed by the governmental
unit involved and is payable either from:
     (a) Taxes levied or which may be levied by
such governmental unit; or
     (b) Adequate special revenues pledged or
otherwise appropriated or required by law to be used for the purpose of such
payment, provided the law authorizing the issuance of the obligation requires
that adequate rates be fixed, maintained and collected at all times so as to
produce sufficient revenue or earnings to pay all operating expenses,
maintenance charges, and the principal, interest and dividends on the
obligation. An obligation payable solely out of special assessments on real
property benefited by local improvements shall not be considered amply secured
unless the total amount so payable is less than 50 percent of the market value
of the real property (including any improvements thereon) and constitutes a
lien on such property.
     (2) An obligation issued, assumed or
guaranteed by a corporation, if the corporation is solvent, has not been in
default on any of its obligations during the preceding three years, and if the
obligation is secured by the pledge of property the market value of which
exceeds the amount of the obligation by 25 percent or more. Obligations which
are the subject of ORS 733.580 and 733.600 are not included within the
provisions of this subsection.
     (3) An obligation found to be amply
secured under regulations duly promulgated by the Director of the Department of
Consumer and Business Services. In making such regulations the director shall
give consideration to regulations pertaining to amply secured obligations
issued from time to time by the National Association of Insurance
Commissioners, and shall consider the financial condition of the issuing,
assuming or guaranteeing corporation as well as the existence or absence of any
pledge of property as security. [1967 c.359 §233]
     733.560
“Unencumbered” defined. As
used in ORS 733.510 to 733.780, “unencumbered” means the nonexistence of any lien,
burden or charge having priority over the lien securing the insurerÂ’s
investment. The following shall not be considered encumbrances on real property
or leasehold interests therein:
     (1) Reservations of mineral, oil or timber
rights, easements, rights of way, sewer rights or rights of walls.
     (2) Liens for taxes or assessments not
delinquent.
     (3) Building restrictions or other
restrictive covenants common to the community.
     (4) Where the loan is secured by a lien
upon real property, a lease under which rents or profits are reserved to the
owner, if in any event the security for the loan would be a first lien upon the
real property except for such lease.
     (5) Where the loan is secured by a lien on
a leasehold, a prior lien on the real property, provided the security for the
loan is a first lien upon the leasehold and there exists no provision
preventing the insurer from continuing the lease in force for the duration of
the lease or no condition or rights of reentry or forfeiture under which such
lien can be cut off, subordinated or otherwise disturbed so long as the lesseeÂ’s
obligations under the lease are discharged. [1967 c.359 §234]
     733.570
“Improved real property” defined. As used in ORS 733.510 to 733.780, “improved real property” means:
     (1) Farmland used for tillage, crop or
pasture;
     (2) Real estate on which permanent
improvements, or improvements under construction or in process of construction,
suitable for residence, institutional, commercial or industrial use, are
situated; and
     (3) Real estate to be developed for the
use or uses set forth in subsection (2) of this section on which improvements,
or improvements under construction or in process of construction, such as
streets, sidewalks, sewers and utilities which will become an integral part of
such development, are situated. [1967 c.359 §235; 1989 c.425 §3]
     733.575
Prohibited use of funds as compensating balances. Except as provided in ORS 733.578, funds of
an insurer shall not be used as compensating balances for loans to other
persons, or otherwise pledged for the benefit of other persons. [1975 c.232 §2]
     733.578
Conditions necessary for investments used to provide compensating balances. Investments of an insurer of the kind
described in ORS 733.650 (4) that are made for the purpose of providing
compensating balances for other persons will not be prohibited by ORS 733.575
or 733.780 while the following conditions are met:
     (1) The investment is made in the name of
and remains the sole property of the insurer;
     (2) The investment is not subject to
appropriation in any manner by any person, including the person for whom the
compensating balance is being provided, the institution in which the deposit is
made and other creditors of such persons;
     (3) The insurer holds an irrevocable
written waiver from the depositary institution, in a form satisfactory to the
Director of the Department of Consumer and Business Services, waiving all
right, title and interest in or to any setoff, bankerÂ’s or similar lien or
other security interest in such investment or any funds represented thereby;
     (4) The investment is unrestricted as to
right of withdrawal except for such restrictions as may be usual and customary
for such investments under ORS 733.650 (4) when no compensating balance is
involved; and
     (5) The insurer is receiving a reasonable
fee, taking into consideration its return on other funds, for providing the
compensating balance involved. [1975 c.232 §3]
     733.580
Investment of required capitalization. (1) Funds of an insurer at least equal to its required capitalization
shall be invested and kept invested as follows:
     (a) In amply secured obligations of the
     (b) In loans secured by first liens upon
improved, unencumbered real property (other than leaseholds) in this state
where:
     (A) The lien does not exceed 50 percent of
the appraised value of the property and the loan is for a term of five years or
less;
     (B) The lien does not exceed 66-2/3
percent of the appraised value of the property provided there is an
amortization plan mortgage, deed of trust or other instrument under the terms
of which the installment payments are sufficient to repay the loan within a
period of not more than 25 years; or
     (C) The investment is insured or guaranteed
by the Federal Housing Administration, the United States Department of Veterans
Affairs, or under Title I of the Housing Act of 1949 (providing for slum
clearance and redevelopment projects) enacted by Congress on July 15, 1949.
     (c) In certificates of deposit or other
investments described in ORS 733.650 (4), to the extent such investments are
insured by the Federal Deposit Insurance Corporation.
     (2) Investments made pursuant to this
section shall be kept free of any lien or pledge. The term “lien or pledge” as
used in this section shall not include a deposit of securities with a
sovereign, nor assets held in trust for the benefit or protection of all or any
class of policyholders of an insurer. [Formerly 738.238; 1991 c.67 §195; 1993
c.447 §113]
     733.590
Investment in obligations of sovereign, political subdivision thereof or
corporation. Funds of an
insurer may be invested in amply secured obligations of a sovereign, political
subdivision thereof or corporation. Expressly included, but not by way of limitation,
are obligations of the following federal agencies and authorities: Federal Home
Loan Banks, Federal Land Banks, Home Owners Loan Corporation, Public Housing
Authorities (to the extent that such obligations are secured by a pledge of
annual contributions to be paid by the United States or an agency thereof), and
Federal Intermediate Credit Banks. [Formerly 738.245]
     733.600
Investment in mortgage loans.
(1) Funds of an insurer may be invested in:
     (a) Loans secured by first liens upon
improved, unencumbered real property (other than leaseholds) in the manner and
subject to the same terms and conditions set forth in ORS 733.580 (1)(b),
except that the property may be located within the boundaries of any sovereign;
for loans described in ORS 733.580 (1)(b)(B), the maximum permitted ratio of
the loan to the appraised value shall be 80 rather than 66-2/3 percent, and the
maximum term of the loan shall be 30 rather than 25 years.
     (b) Loans secured by first liens upon a
leasehold of improved, unencumbered real property located within the boundaries
of any sovereign if:
     (A) The leasehold has a period of not less
than 20 years to run from the date of the loan, inclusive of the term which may
be provided by an enforceable option of renewal, the loan does not exceed 70
percent of the fair market value of the leasehold together with any
improvements located thereon which are subject to the lien, the terms of the
loan provide for amortization payments to be made by the borrower on the
principal thereof at least once in each year in amounts sufficient to
completely amortize the loan within a period of four-fifths of the term of the
leasehold, and the insurer is entitled to be subrogated to all rights of the
lessee under the leasehold; or
     (B) The investment is insured or
guaranteed in the manner provided in ORS 733.580 (1)(b)(C).
     (2) A loan upon the security of real
property or a leasehold interest therein which is a participation in or a part
of a series or issue shall not be made unless the insurer holds a senior
participation or similar security interest in the mortgage or deed of trust
giving it substantially the rights of a first mortgagee.
     (3) Nothing in ORS 733.510 to 733.780
shall prohibit an insurer from renewing or extending a proper loan secured by a
first lien upon real property or a leasehold interest therein made pursuant to
this section or to ORS 733.580 for the original or a lesser amount even though
such amount is a greater percentage of the current fair market value of the
real property or leasehold than would otherwise be permitted under such
sections. [Formerly 738.255; 1995 c.79 §360]
     733.610
Investment in real property.
(1) Except as otherwise provided in ORS 733.580 and 733.600, an insurer may
invest in real property only if used for the purposes or acquired in the manner
and within the limits as follows:
     (a) The insurer may invest in the land and
the buildings thereon in which it has its principal office, and in such other
real property as required for its convenient accommodation in the transaction
of business. Such investments shall not exceed in the aggregate 10 percent of
the assets of the insurer, except with the consent of the Director of the
Department of Consumer and Business Services.
     (b) The insurer may invest in real
property that is acquired in satisfaction of loans, mortgages, liens, judgments
or debts previously owing to the insurer in the course of its business.
     (c) The insurer may invest in real
property acquired in part payment of the consideration on the sale of other real
property owned by the insurer if the transaction does not increase the
investment of the insurer in real property.
     (d) The insurer may invest in real
property acquired by gift or devise or through merger, consolidation or bulk
reinsurance of another insurer under the Insurance Code.
     (e) The insurer may invest in the vendor’s
interest in real property subject to a contract of sale. The amount invested in
the vendorÂ’s interest under such a contract shall not exceed, except with the
consent of the director:
     (A) Ninety percent of the market value of
the subject real property, when the real property is one or two family
residential property.
     (B) Eighty percent of the market value of
the subject real property, when the real property is other than that described
in subparagraph (A) of this paragraph.
     (f) The insurer may invest in real
property or any interest therein that is acquired or held by purchase, lease or
otherwise, other than real property used primarily for agricultural, ranch,
mining, development of oil or mineral resources, recreational, amusement or
club purposes, if the real property or interest therein is acquired as an
investment for the production of income or acquired to be improved or developed
for such investment purposes pursuant to an existing program therefor. The
insurer may hold, improve, develop, maintain, manage, lease, sell and convey
real property acquired by it under this paragraph. Real property and interests
therein so acquired may be leased or sublet. Except with the consent of the
director, an insurer shall not have an amount exceeding five percent of its
assets at any one time invested in real property and interests therein under
this paragraph.
     (g) The insurer may invest in additional
real property and in equipment incident to real property if necessary or
convenient for the purpose of enhancing the sale or other value of real
property previously acquired or held by the insurer under paragraph (b), (c),
(d) or (f) of this subsection. The real property and equipment shall be included,
together with the real property for the enhancement of which it was acquired,
for the purpose of applicable investment limits.
     (h) The insurer may invest in real
property without regard to whether the property is income-producing when
acquired if the insurer intends to improve the property for resale or if the
insurer intends that the property will be income-producing. The insurer may
also invest in real property that is income-producing and used primarily for
agricultural, ranch, mining, development of oil or mineral resources,
recreational, amusement or club purposes. Funds invested under this paragraph
shall not exceed the lesser of five percent of the insurerÂ’s assets or 50
percent of the insurerÂ’s capital and surplus, except with the consent of the
director.
     (i) Except with the consent of the
director, all real property owned by the insurer under this subsection, except
as to properties described in paragraphs (a) and (e) of this subsection, shall
not at any time exceed 10 percent of the assets of the insurer.
     (2) Except as otherwise provided in
subsection (3) of this section:
     (a) Real property acquired under this
section shall be disposed of within five years after it ceases to be
income-producing or to be used by the insurer for its business operation,
whichever is later.
     (b) Real property acquired under
subsection (1)(h) of this section that is not income-producing when acquired
shall be disposed of within five years after acquisition if the real property
is not improved for resale or if the real property is not income-producing
during the five years.
     (c) When an investment or any combination
of investments by an insurer in real property exceeds any applicable limitation
under this section other than a limitation of time, the insurer, not later than
the fifth year after the limitation is exceeded, shall dispose of sufficient
real property that is subject to the limitation to comply with the limitation.
     (3) Any real property acquired under this
section that otherwise qualifies as an investment under ORS 733.510 to 733.780
may be retained and held if approved as an investment in the manner prescribed
by ORS 733.730 and 733.740. The director may extend the time limit prescribed
in subsection (2) of this section if the interests of the insurer will suffer
by a “forced sale” of the property. [Formerly 738.265; 1979 c.846 §1; 1989
c.425 §4; 2003 c.576 §555]
     733.620
Investment in stocks of corporation. (1) Funds of an insurer may be invested in stocks (including trust
certificates) of solvent corporations organized and carrying on a business
under the laws of a sovereign as follows:
     (a) Preferred or guaranteed stocks if the
corporation is not in default or arrears as to any preferred or guaranteed
dividend and has continuously and regularly paid such dividends during the
preceding three years or has paid cash dividends for five years on common
stock.
     (b) Common stocks as provided in paragraph
(c) of this subsection if:
     (A) The obligations and preferred stock,
if any, of such corporation are eligible for investment under ORS 733.510 to
733.780; and
     (B) The stock is registered on a national
securities exchange regulated under the Securities Exchange Act, or if of a
type not commonly so registered is regularly traded on a broad national or
regional basis.
     (c) Notwithstanding ORS 733.780 (1), not
more than 25 percent of admitted assets may be in common stocks that have not
paid a cash dividend during each of the five years preceding the date of
acquisition.
     (2) An insurer shall not invest so as to own
or control more than five percent of the voting power outstanding of a
corporation, nor shall it invest in the obligations or stocks of a corporation
if the insurer, directors, trustees and officers own or control, or as a result
thereof shall own and control, in the aggregate more than 50 percent of the
voting power. This subsection does not apply to limit the amount of an insurerÂ’s
assets that may be invested in the voting securities of a depository
institution or any company that controls the depository institution. [Formerly
738.275; 1995 c.565 §1; 2001 c.377 §39]
     733.630
Investment in securities or obligations of certain corporations. (1) Except as provided in this section,
funds of an insurer may be invested in common stock, preferred stock, debt obligations
and other securities of one or more corporations without regard to the
provisions and limitations of ORS 733.590, 733.620, 733.770 and 733.780 (1)(a)
if the corporation is engaged, or will be engaged, in the kind of business or
activity which is related to the insurance business as described in ORS
733.635, provided 80 percent or more of the shares of the corporation having
voting powers are owned by the insurer either by itself or with prior approval
of the Director of the Department of Consumer and Business Services in
cooperation with one or more other persons.
     (2) Except as provided in subsection (3)
of this section, the amount of funds so invested may not exceed the lesser of
10 percent of the insurerÂ’s assets or 50 percent of the amount of the insurerÂ’s
combined capital and surplus. However, after such investments, the combined
capital and surplus of the insurer must be reasonable in relation to the
outstanding liabilities of the insurer and adequate to its financial needs. For
the purpose of this subsection, the amount of investments by an insurer shall
be calculated by:
     (a) Excluding the admitted value of
investments in subsidiaries of the insurer;
     (b) Adding the total moneys or other
consideration expended and obligations assumed in the acquisition or formation
of a subsidiary, including all organizational expenses and contributions to
capital and surplus of the insurance subsidiary or the shareholdersÂ’ equity of
a noninsurance subsidiary, whether or not represented by the purchase of capital
stock or issuance of other securities;
     (c) Adding to the sum determined under
paragraph (b) of this subsection all amounts expended in acquiring additional
common stock, preferred stock, debt obligations and other securities of a
subsidiary, and all contributions to the capital or surplus of an insurance
subsidiary or the shareholdersÂ’ equity of a noninsurance subsidiary, subsequent
to its acquisition or formation; and
     (d) Subtracting from the sum determined
under paragraph (c) of this subsection the return of any amount included in
paragraph (b) or (c) of this subsection, whether the return is in the form of
cash, securities or other property.
     (3) Funds of an insurer may be invested in
common stock, preferred stock, debt obligations and other securities of one or
more subsidiaries engaged or organized to engage exclusively in the ownership
and management of assets authorized as investments for the insurer. However,
each subsidiary must agree to limit its investments in any asset so that the
investments will not cause the amount of the total investment of the insurer to
exceed any of the investment limitations specified in subsection (2) of this
section or in ORS 733.510 to 733.780 that apply to the insurer. For the purpose
of this subsection, the total investment of the insurer includes:
     (a) Any direct investment by the insurer
in an asset; and
     (b) The insurer’s proportionate share of
any investment in an asset by any subsidiary of the insurer, which shall be
calculated by multiplying the amount of the subsidiaryÂ’s investment by the
percentage of the ownership of the subsidiary.
     (4) With the approval of the director, an
insurer may invest any greater amount in common stock, preferred stock, debt
obligations or other securities of one or more subsidiaries. However, after
such an investment, the combined capital and surplus of the insurer must be
reasonable in relation to the outstanding liabilities of the insurer and
adequate to its financial needs.
     (5) An insurer must determine whether any
investment pursuant to subsection (2), (3) or (4) of this section meets the
applicable requirements on the last day of the month immediately preceding the
day on which the investment is made. The determination must be made prior to
the investment by calculating the applicable investment limitations as though
the investment had already been made, taking into account the then outstanding
principal balance on all previous investments in debt obligations and the value
of all previous investments in equity securities as of the day they were made,
net of any return of capital invested, not including dividends. [1967 c.359 §241;
1969 c.285 §1; 1993 c.447 §113a; 1995 c.638 §7; 2005 c.255 §1]
     Note: Sections 2 and 3, chapter 255, Oregon Laws
2005, provide:
     Sec.
2. Investments by health care service contractors. Notwithstanding ORS 733.630, a health care
service contractor may make investments subject to ORS 750.047 (repealed by
this 2005 Act) as long as the investments are based on the combined capital and
surplus of the health care service contractor as of December 31, 2004. The
combined capital and surplus of the health care service contractor on the day
the investment is made must be reasonable in relation to the outstanding
liabilities of the health care service contractor and adequate to its financial
needs. An investment made under this section is a permitted investment for the
purpose of ORS 733.630. [2005 c.255 §2]
     Sec.
3. Section 2 of this 2005
Act is repealed on January 2, 2009. [2005 c.255 §3]
     733.635
Approved activities of corporations in which investments authorized. Investments authorized by ORS 733.630 may be
made in corporations engaged, or which will be engaged, in one or more of the
following insurance or ancillary businesses:
     (1) Any kind of insurance business
authorized by the jurisdiction in which it is incorporated.
     (2) Any kind of business primarily related
to the insurance business carried on by the parent.
     (3) Acting as an insurance producer for
its parent or for any of its parentÂ’s insurer subsidiaries or intermediate
insurer subsidiaries.
     (4) Investing, reinvesting or trading in
securities for its own account, that of its parent, any subsidiary of its
parent, or any affiliate or subsidiary.
     (5) Management of any investment company
subject to or registered pursuant to the Federal Investment Company Act of
1940, as amended, including related sales and services.
     (6) Acting as a broker-dealer subject to
or registered pursuant to the Securities Exchange Act of 1934, as amended.
     (7) Rendering investment advice to
governments, government agencies, corporations or other organizations or
groups.
     (8) Rendering other services related to
the operations of an insurance business including, but not limited to,
actuarial, loss prevention, safety engineering, data processing, accounting,
claims, appraisal and collection services.
     (9) Ownership and management of assets or
property which the parent could itself own and manage.
     (10) Acting as administrative agent for a
government instrumentality which is performing an insurance function.
     (11) Financing of insurance premiums.
     (12) Owning a corporation or corporations
engaged or organized to engage exclusively in one or more of the businesses
specified in subsections (1) to (11) of this section. [1969 c.285 §3; 2003
c.364 §84]
     733.640
Lending funds; limitations on loans. (1) Funds of an insurer may be invested in loans secured by pledges of
obligations and stocks eligible for investment under ORS 733.510 to 733.780. As
of the date the loan is made, it shall not exceed in amount 80 percent of the
market value of the collateral pledged. No such loan shall be made for the
purpose of providing funds to purchase or carry stocks registered on a national
securities exchange.
     (2) Funds of an insurer may be invested in
loans secured by personal property or fixtures if such loan is:
     (a) In connection with a loan on the
security of real property or a leasehold as provided in ORS 733.580 or 733.600;
     (b) In an amount not exceeding 20 percent
of the amount loaned on the real property or leasehold;
     (c) For a term of not more than five
years;
     (d) Secured by a security interest which
constitutes a first lien, except for taxes not then delinquent, on tangible,
permanent personal property of the borrower kept and used on the premises,
other than stocks of goods held for sale or transfer in the ordinary course of
business or items which by normal use will be consumed or depleted during the
period of the loan; and
     (e) In an amount, the ratio of which to
the value of the security does not exceed the ratio of the companion loan to
the value of the real property or leasehold.
     (3) Funds of an insurer may be loaned to
its own life insurance policyholder upon the security of such life insurance
policy. The loan shall not exceed the cash value of the policy. [Formerly
738.285]
     733.650
Investment of funds in certain obligations and other specified items. Funds of an insurer may be invested in the
following:
     (1) Obligations secured by a mortgage or
deed of trust payment of which is guaranteed by a policy of mortgage insurance.
     (2) Obligations issued, assumed or
guaranteed by the International Bank for Reconstruction and Development.
     (3) Bank and bankers’ acceptances and
other bills of exchange of the kind and nature made eligible by law for
purchase in the open market by federal reserve banks.
     (4) Deposits, certificates of deposits,
accounts or savings or certificate shares or accounts of or in banks, trust
companies, savings and loan associations or building and loan associations
insured with the Federal Deposit Insurance Corporation or qualified to do
business under the laws of this state.
     (5) Obligations issued by trustees or
receivers of a corporation created or existing under the laws of a sovereign
which, or the assets of which, are being administered under the direction of a
court having jurisdiction if the obligation is adequately secured as to
principal and interest.
     (6) Transportation equipment used wholly
or in part within a sovereign, or adequately secured trust certificates of
participation or similar obligations or contracts evidencing an interest in
such transportation equipment, where the investor is entitled to receive a
determined or determinable portion of rental, purchase or other obligatory
payments for use or purchase of the equipment.
     (7) Purchase contracts or lease-purchase
agreements executed under the Federal Public Buildings Purchase Contract Act of
1954, or the Post Office Department Property Act of 1954.
     (8) Stock of the Federal Home Loan Bank to
the extent of the minimum required by the Federal Home Loan Bank Act. An
insurer acquiring such stock may exercise all rights and powers given to
members under such Act, including but not by way of limitation the right to
obtain advances or borrow money from such bank and to pledge collateral as
security therefor.
     (9) Obligations issued, assumed or
guaranteed by the Inter-American Development Bank.
     (10) Obligations issued, assumed or
guaranteed by the Asian Development Bank.
     (11) Obligations issued, assumed or guaranteed
by the African Development Bank. [Formerly 738.295; 1969 c.336 §9; 1969 c.692 §8;
1973 c.514 §1; 1985 c.456 §2; 1993 c.447 §114; 2007 c.426 §6]
     733.652
Investment of funds of separate accounts. Except as may be prescribed by the Director of the Department of
Consumer and Business Services under ORS 733.220 (3) for reserves for
guaranteed benefits and funds:
     (1) Amounts allocated to a separate
account and accumulations thereon may be invested and reinvested without regard
to the requirements and limitations prescribed by ORS 733.510 to 733.780,
except as expressly provided for separate accounts under such sections; and
     (2) The investments in separate accounts
shall not be considered in applying the investment limitations applicable to
the general investments of the insurer. [1973 c.435 §9]
     733.654
Limitation on amount of separate account investments; exceptions. An insurer shall not invest the funds of a
separate account so as to have more than 10 percent of the market value of the
assets of the account invested in or secured by the stocks, obligations or
property of any one person or political subdivision, or invested in a single
parcel of real property or any other single investment. This section does not
apply to:
     (1) Funds equaling 25 percent of the
market value of the total assets in the separate account;
     (2) Investments in, or loans upon, the
security of the general obligations of a sovereign; or
     (3) Investments in certificates of
deposits insured by the Federal Deposit Insurance Corporation. [1973 c.435 §10;
1981 c.472 §27; 1999 c.107 §17]
     733.656
Limitation on securities owned or controlled by separate account investments. An insurer shall not invest the funds of a
separate account so as to own or control, under the insurerÂ’s general and separate
accounts in the aggregate, more than 10 percent of the voting power outstanding
of any issuer of securities. Securities held in separate accounts, the voting
rights in which are exercisable only in accordance with instructions from
persons having interests in such accounts, shall not be considered in applying
this section. [1973 c.435 §11]
     733.658
Applicability of separate account investment limitations. The limitations provided in ORS 733.654 and
733.656 do not apply to the investment of separate account funds in the
securities of an investment company registered under the federal Investment
Company Act of 1940, as amended, if the investments of the investment company
comply in substance with ORS 733.654 and 733.656. [1973 c.435 §12; 1997 c.249 §219]
     733.660 [1967 c.359 §244; repealed by 2001 c.318 §13]
     733.670
Investment of funds under “prudent investor” standard. (1) Funds of an insurer may be invested in a
manner not expressly prohibited under ORS 732.325 and 733.780, provided such
investments are made in the exercise of the judgment and care under the
circumstances then prevailing which investors of prudence, discretion and
intelligence exercise in the management of their own affairs not in regard to
speculation but in regard to the permanent disposition of their funds,
considering the probable income as well as the probable safety of their
capital.
     (2) Funds invested under this section
shall not exceed the lesser of seven and one-half percent of the insurerÂ’s
assets or the excess of the insurerÂ’s assets over all liabilities and required
capitalization.
     (3) If the Director of the Department of
Consumer and Business Services has reason to believe that loans or investments
made pursuant to this section are not adequately secured or are not yielding an
income the director may direct the insurer to report under oath the amount of
such loans or investments, the security therefor and its market value. [Formerly
738.305; 1979 c.846 §2; 1989 c.425 §4a]
     733.680
Acquisition and retention of personal property generally; purchases or loans
for protection of investment property. (1) An insurer may acquire and retain personal property received as a
dividend, gift or devise, or pursuant to a lawful plan of merger, consolidation
or reorganization or bona fide agreement of bulk reinsurance, or in
satisfaction or liquidation of an obligation, or in exchange or part payment
for real or personal property previously owned or to protect or enhance such
property.
     (2) An insurer may make purchases or loan
sums necessary to protect, preserve or enhance investment property, real or
personal, which it is otherwise authorized to acquire or hold.
     (3) The Director of the Department of
Consumer and Business Services shall allow as assets in any determination of
the financial condition of the insurer only such property or investments
acquired or retained under this section as are consistent with the customary
operations of an insurer. [Formerly 738.315]
     733.685
Investment of funds by home protection insurer; rules. Funds of a home protection insurer may be
invested in tangible personal property held by the insurer for the purpose of
performing or providing repairs or replacements under its home protection
policies. Funds so invested shall not exceed 25 percent of the assets of the
insurer that are allowable in determining its financial condition under the
Insurance Code, unless otherwise allowed under rules issued by the Director of
the Department of Consumer and Business Services. [1981 c.247 §13]
     733.690
Investment of funds in title plant. Funds of a title insurer may be invested in its title plant. [1967
c.359 §247]
     733.695
Investment of funds in obligations that are not investment quality; rules. Funds of an insurer may be invested in
obligations that are not investment grade as established by the Director of the
Department of Consumer and Business Services by rule, but the funds that an
insurer may invest under this section shall not exceed 20 percent of the
insurer’s assets. [1989 c.425 §2b; 1993 c.447 §22]
     733.700
Investment of funds in health care service facilities. Funds of a health care service contractor
may be invested in all real and personal property used exclusively by the
contractor to provide authorized health care services. [1967 c.359 §248]
     733.710
Investments authorized by prior law; date of eligibility of investment. (1) An investment which was legal and proper
immediately before June 8, 1967, shall be considered a proper investment and
shall be subject to extension or renewal.
     (2) Eligibility of an investment shall be
determined as of the date of its acquisition. [Formerly 738.325]
     733.720
Investments subject to additional limitations and requirements. Except as may be expressly provided to the
contrary in ORS 733.510 to 733.780, all investments shall be subject to the
qualifications, restrictions and limitations set forth in ORS 733.510 to
733.780. [Formerly 738.333]
     733.730
Approval by board of directors of investments and deposits. (1) Investments and sales or exchanges
thereof, except for policy loans of an insurer issuing life insurance policies,
shall be approved by the board of directors or a committee thereof charged with
the duty of investing the funds of the insurer.
     (2) Deposits shall be made in banks or
banking institutions approved by the board of directors. [Formerly 738.335]
     733.740
Record of investments required.
As to each investment, an insurer shall make a written record in permanent
form, signed by a person authorized by the board of directors or by a committee
thereof charged with the duty of investing the funds. The record shall show the
authorization and approval of the investment and in addition shall contain:
     (1) In the case of mortgage loans:
     (a) The name of the borrower;
     (b) The location and legal description of
the property;
     (c) A physical description and the
appraised value of the security as determined by a competent and qualified
appraiser; and
     (d) The amount of the loan, rate of
interest and terms of repayment.
     (2) In the case of obligations:
     (a) The name of the obligor;
     (b) A description of the security and
record of earnings;
     (c) The amount invested and the rate of
interest or dividend; and
     (d) The maturity and yield based upon the
purchase price.
     (3) In the case of corporate stocks:
     (a) The name of the issuing corporation;
     (b) The record of earnings and of
dividends paid for the preceding three years for preferred stock and for the
preceding five years for common stock;
     (c) A summary of the financial statement
of the corporation as of the end of the preceding fiscal year;
     (d) The exchange, if any, on which the
stock is listed; and
     (e) The amount invested and the number of
shares acquired and held.
     (4) In the case of real estate, leaseholds
or vendorsÂ’ interests under contracts of sale therein:
     (a) The location and legal description of
the property;
     (b) A physical description and the
appraised value of the property and interest therein;
     (c) The purchase price and terms;
     (d) The amount of any lien known to be
against the property;
     (e) If of a leasehold, the terms of the
outstanding lease; and
     (f) If a vendor’s interest under a
contract of sale, the terms and status of payments under the contract.
     (5) In the case of all investments:
     (a) The amount of any expenses and
commissions incurred on account of the investment or loan and by whom and to
whom payable if not covered by contracts with mortgage loan representatives or
correspondents that are part of the insurerÂ’s records; and
     (b) The name of any director, trustee or
officer of the insurer, having a direct, indirect or contingent interest in the
loan, security or property, or who would derive, directly or indirectly, any
benefit therefrom, and the nature of such interest or benefit. [Formerly
738.345; 2005 c.22 §488]
     733.750
Disposal of investments on order of director. After a hearing, the Director of the Department of Consumer and
Business Services may by written order require the disposal of an investment
which the director finds to be made or retained in violation of the Insurance
Code, or of an investment which the director, for good cause, determines to be
prejudicial to, and to impair the security of, the stockholders or
policyholders of the insurer. [Formerly 738.355]
     733.760
Insurance required on buildings on property which is security for loan. On loans secured by liens upon real property
or leasehold interests therein, the buildings and other improvements located on
the premises shall be kept insured against loss or damage from fire in an
amount not less than the unpaid balance of the obligation or the insurable
value of the property, whichever is the lesser. The fire insurance policy or
policies shall be payable to the insurer, or a trustee for its benefit, and
continued in force until the loan is repaid or satisfied. Such policy or
policies shall be held by the insurer or the trustee, unless the Director of
the Department of Consumer and Business Services has determined that a
different method of protecting the insurers against loss is satisfactory and
has given prior approval of such method to the insurer. [1967 c.359 §254; 1969
c.336 §10]
     733.770
Limitations on investments in property of any one person or single parcel of
real estate. (1) An insurer
shall not have any combination of investments in or secured by the stocks,
obligations, and property of one person, corporation or political subdivision
in excess of 10 percent of the insurerÂ’s assets, nor shall it invest more than
10 percent of its assets in a single parcel of real property or in any other
single investment. This subsection does not apply to:
     (a) Investments in, or loans upon, the
security of the general obligations of a sovereign;
     (b) Policy loans by insurers issuing life
insurance policies;
     (c) Investments by a title insurer in its
title plant, or in real property not in excess of 50 percent of the insurerÂ’s
combined capital and surplus; or
     (d) Investments by a health care service
contractor in all real or personal property used exclusively by such contractor
to provide authorized health care services or in real property used primarily
for its home office.
     (2) Notwithstanding subsection (1) of this
section and subject to approval by the Director of the Department of Consumer
and Business Services in writing, a domestic insurer organized before 1950 may
invest an amount not exceeding 15 percent of its assets in real property used
primarily for its home office. [Formerly 738.375; 1983 c.732 §1]
     733.780
Prohibited investments. (1)
An insurer shall not make investments:
     (a) Which at the time of purchase or
acquisition are not interest-bearing or dividend or income-paying, or are in
default in any respect; or
     (b) From which the insurer is not entitled
to receive for its exclusive account and benefit the interest, dividends or
income.
     (2) Subsection (1)(a) of this section
shall not apply to property acquired under ORS 733.610, 733.670 or 733.680 if
the property is acquired with the intent and expectation that it will be
income-producing.
     (3) An insurer shall not invest its funds
in any investment or security found by the Director of the Department of
Consumer and Business Services to be designed to evade any prohibition of the
Insurance Code. [Formerly 738.385]
_______________
Disclaimer: These codes may not be the most recent version. Oregon may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.